Specialist IT group Adapt IT’s share soared more than 14% after fellow technology company Huge Group made an R800m takeover bid for it.
In morning trade on Thursday, Adapt IT’s share jumped 17.21% to R4.70 after earlier rising as much as 29.9%, which put it at a 16-month high. During the day, the stock pared its gains, ending the day 13.47% firmer at R4.55.
Huge Group, whose subsidiaries operate in the telecommunications, media, technology and software industries, has made a takeover bid for JSE-listed software group Adapt IT, valuing it at R800m.
The offer, released after markets closed on Wednesday, is equivalent to R5.52 per Adapt IT share, a 33% premium on the 30-day weighed average share price as of January 26.
Huge Group would offer Adapt IT shareholders 0.9 of its shares for each of theirs, implying it could issue up to 130.5-million shares, which would increase its issued paper by three-quarters.
The offer is conditional pending approval from Huge shareholders.
Huge, a holding company valued at R1.07bn on the JSE, implemented its “growing Huge” strategy in March 2018 aimed at increasing its customer base. This base comprises mostly small and medium enterprises, with the group also seeking to add to the diversity of services it can offer, including through acquisitions.
Huge generated R231.3m of revenue in its six months to end-August, a 5.5% fall from the previous year.
Johannesburg-based Adapt IT is valued at R581m on the JSE and provides software solutions to the education, manufacturing, energy, financial services, communications and hospitality sectors. Clients include MTN, Cell C, Zimbabwe’s Econet and the UK’s Vodafone.
The group had grown revenue 3% to R1.48bn in its year to end-June, and four of the group’s six operating divisions grew operational profits, with the hospitality and manufacturing divisions hit by poor trading conditions in the wake of the Covid-19 pandemic. Despite setbacks in those sectors, the company said lockdowns had created opportunities for Adapt IT to offset lost revenues with new services.
Adapt IT’s education division, which contributes about 16% in group revenue, posted an 8% rise in revenue. Earnings in its communications business, which contributed 21% of group revenue, jumped by a third.
At the end of August, Huge had net debt of R133m, while at the end of June, Adapt IT had net debt of R337m.
The move comes a few days after Huge Group announced plans to list on the London Stock Exchange (LSE). If all goes according to plan, Huge shares will be available for trading on the JSE, A2X and LSE.
Shares in Huge Group were marginally down 0.81% at R6.10 on Thursday evening.
With Mudiwa Gavaza
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